Calendar Week of 11/22/2021

Primary issuance has strengthened over recent weeks as state and local governments seek to finance new issue deals amidst opportunistic borrowing levels and fluctuating economic activity nationwide. Participants remain engaged with macro-economic factors, which continue to evolve as supply chain difficulties and rising costs for basic goods and services hinder the return to pre-pandemic operating levels. Following the most recent round of government funding geared towards national infrastructure, the House of Representatives passed the $1.7 trillion Build Back Better Act with spending outlined for various social and climate initiatives. As the Build Back Better package heads towards the Senate, participants are focused on key muni bond provisions which were initially omitted from earlier bi-partisan versions, most notably the reinstatement of tax-exempt refunding's, which was eliminated during the 2017 Tax Cuts and Jobs Act. Bi-partisan leaders remain focused on passing the social and climate package prior to year-end, falling into a similar timeline of a potential national default after a recent $480Bn short term national debt increase is set to deplete during the first week of December. While a formal social and climate package has not been approved, persistent federal funding appropriated towards state and local issuers is positioned to fit well within the primary arena, as issuers seek to lower expenditures while promoting greater economic activity in order to sustain operations. As markets climb higher, muni bond rate activity has hovered within a tight band, after cuts of 1-3bps were noted in the front end of the curve, with no changes occurring in the intermediate and long end over the week. Subtle movements in rates has amounted to a slight uptick in the 30YR Muni/UST ratio which climbed two points to 81% paired with the 10YR ratio which currently sits at 69%. With nearly five weeks remaining until the new year, buyside activity remains strong across the board as demand for new issue paper continues to outweigh supply, fueled by greater mutual fund inflows and suppressed yields driven by substantial new issue oversubscriptions.

Strong demand from institutional and retail accounts complimented last week's sizable calendar which supplied $16.7Bn, presenting par focused investors greater opportunity after the State of California dominated the majority of the calendar, representing $5.4Bn of last week's issuance. The California Health Facilities Financing Authority (Aa3/AA-/AA-) priced $1Bn of revenue bonds with proceeds designated for Cedars-Sinai Health System with investor interest suppressing yields by 3-6bps across the scale, and the 2040 maturity falling +50bps off the interpolated MAC. The State of Mississippi (Aa2/AA/AA) also experienced a successful pricing after selling $965mm taxable general obligation bonds spanning 10/2022-10/2032 with significant bumps across the curve, ranging from 5-20bps with the 2036 maturity registering a 20bp bump or +95bps spread to the 10YR UST following robust order flow. This week's Thanksgiving holiday-shortened calendar will provide $1.4Bn spanning across 53 new issues with the Desert Community College District (Aa2/AA/-/-) leading the negotiated calendar offering $292mm of general obligation bonds spanning across three series with maturities ranging from 08/2022-08/2051. The Massachusetts Housing Finance Agency (Aa1/AA+/-/-) will also step up to the plate to price $71mm single family housing revenue bonds selling today 11/22, senior managed by Citi. This week's competitive calendar will span across 19 new issues for a total of $114mm with Andrews County Hospital District, TX (A3/-/-) leading the auction schedule to sell $27mm general obligation refunding bonds.

Negotiated ESG Offerings Week of 11/22/2021:

Posted 22 November 2021 by Matthew Gerstenfeld, Municipal Bond Business Development Specialist, IHS Markit

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